Diluted EPS Q34

CFA Level I
#1

“Pardew Jewels had 340,000 common shares outstanding and 45,000 shares of preferred stock paying USD10dividend per share. Each preferred share is convertible into one common share. In 2008, the company reported a netincome of USD2.1 million for the year.
What is the reported diluted EPS on the company’s financial statements?
(A) 4.85 correct
(B) 5.45
(C) 6.18”

Can someone please explain why A is correct? I want to take 2 100 000/385000=5,45 but the solution says that I should take net income minus preferred dividends/ number of shares outstanding

#2

BAsic EPS = (2.1 - 0.45) / 0.34 = 4.85

Consider dilluted
2.1 / (0.34 + 0.045) = 5.45 > Basic EPS so when presenting Dilued EPS ignore thconvertible (assume it is not converted)/

Only included items if D.EPS < Basic EPS

#3

Aha okay I think I get it now. It is 2,1-0,45 because we also remove the amount from the preferred stock. And the diluted EPS is always lower than the basic EPS.

Many thanks!